And some challenger banks won’t last that long.
It was the buzzword of banking throughout 2017.
But, now Open Banking is here, it’s turning out to be a bit of a damp squib.
Not only did six major banks miss the deadline to open up their users’ data – with deadline extensions granted of up to a year – but the commercial boss of Britain’s largest challenger bank told The Memo that any Open Banking revolution could still be years away.
How long exactly? “I think we’ll see innovation in about three to five years time,” he says.
“First, developers are going to have to figure out what to do with this data, then they’ll move to an actual product, and hopefully one that catches on, I don’t think it’s going to be a quick turnaround.”
And that could be a huge problem for Britain’s digital challenger banks.
Riseborough believes many of the colourful card-wielding digital challenger banks are running into problems because they’re struggling to become people’s primary bank accounts.
“They’re getting a lot of secondary account holders – so spending accounts or joint accounts – but they’re not getting the accounts where salaries are being paid in,” he says.
Instead many are now looking to commissions earned from promoting other services as a way of generating revenues (like when Starling refers you to TransferWise in order to send money).
If Open Banking takes off, it could be a huge opportunity for these challengers to refer you to all kinds of new services that pop up.
“So, if you’re Monzo, you have a vested interest in talking up Open Banking as something that’ll be huge.”
If Open Banking isn’t huge, or even if it just takes a long time to arrive, that could leave digital challenger banks in the lurch.
“How are they going to be profitable?” asks Riseborough.
“There’s a responsibility to your customers to make sure that you can pay your way, you can’t just keep burning through investor cash without a way to become a sustainable business.”
Riseborough expects there’ll be one or two digital winners, “but there’s another 20 to 30 banks [applying for banking licences] at the moment, that’s a lot of banks. So I think there’ll be winners and losers.”
For Metro Bank, its latest financial results in October saw the bank holding £10.8bn in deposits, turning a £7.3m profit with over 1.1m account holders – figures that would turn any challenger bank CEO green with envy, possibly to match their colourful bank card.